Investing

How to Earn Interest on Crypto With High Yields

Beginner
Investing
15 сент. 2023 г.

Part 1: The Basics of Earning Crypto Interest

Cryptocurrency markets are well-known for their inherent volatility. While this poses nontrivial risks, it also opens up unique opportunities to earn yields and returns that the traditional stock market investor may not even dream of.

These substantial yield opportunities have grown larger and more accessible with the development of the decentralized finance (DeFi) industry. The real game changer has come about with the boom of crypto centralized exchanges (CEXs) and decentralized exchanges (DEXs), both striving to give customers a diversity of financial products.

In this article, we’ll show you how to earn interest on crypto and, more importantly, how to choose investment opportunities that will optimize your yields.

Key Takeaways:

  • Some vital considerations in maximizing returns on crypto include investing with stablecoins for more stable income, sticking to one platform for higher long-term interest and understanding the type of interest rate.

  • Understanding your country’s stance on crypto regarding taxes is crucial, as it may impact your total gain.

  • Bybit offers you eight products for earning interest on crypto: Bybit Savings, Liquidity Mining, Dual Asset, Wealth Management, ETH 2.0 Liquid Staking, Bybit Launchpool, Bybit Lending and Bybit NFT Marketplace.

Jargon to Know to Help You Earn Interest on Crypto

Before diving into the best opportunities to earn interest on crypto, let’s cover some of the most important terms used in the crypto finance industry.

9 key terms to know to earn interest on crypto

Annual Percentage Yield (APY)

Annual percentage yield (APY) is yearly interest that accrues to your investment, taking into account the effect of compounding.

Market Capitalization

Market capitalization is the measure of a crypto’s market value, which is derived by multiplying its current market price by its circulating supply.

Total Value Locked (TVL)

Total value locked (TVL) refers to the total market value of all the crypto funds currently locked in a DeFi platform’s smart contracts.

Bear Market

A bear market refers to a substantial and usually prolonged market decline. Bear markets are characterized by the dominance of selling rather than buying among market players.

Blockchain

A blockchain is a decentralized digital network that stores transactions in chains of blocks. Transactional activity on a blockchain is controlled collectively by all of the network’s participants/users. Most of the activity on a blockchain network — exchange of funds between users, confirmation of transactions, and business operations — involves the use of crypto coins.

Proof of Stake

Proof of stake (PoS) is a consensus mechanism used on some blockchain networks for validating block transactions. In PoS blockchains, network users lock a certain amount of their crypto assets on the platform for the right to validate transactions and receive staking rewards.

Crypto Staking

In a broad sense, crypto staking refers to locking crypto funds, both on centralized and decentralized platforms, in order to generate income.

Liquidity Mining

Liquidity mining is a process whereby you deposit your crypto assets in a DEX’s liquidity pool in order to receive rewards in tokens and fees.

Impermanent Loss

Impermanent loss occurs when the price of a deposited asset in a liquidity pool decreases from the time when you deposited it.

How to Earn Interest on Your Crypto

The primary methods through which you can earn interest on crypto are staking and lending. Staking involves locking your funds on a blockchain to help validate transactions, in return for which you earn crypto rewards from the platform. Additionally, some centralized platforms — such as CEXs and liquid staking service providers like Lido — also offer staking opportunities.

Staking, however, has moved beyond its original intent and now often refers to a plethora of investment products on CEXs and DEXs, in which funds aren’t specifically used for blockchain validation.

Lending refers to depositing your funds to lending pools (and sometimes to other types of pools as well) with DeFi lending and borrowing protocols, as well as with centralized crypto lending platforms.

Crypto Lending vs. Staking

When considering lending and staking crypto, of key interest to investors are the security and investment risks involved.

Security

Staking is often viewed as a safer option than lending. After all, staking is a fundamental process on a blockchain network, and is thus well-protected by the overall blockchain security model. If staking fails on a blockchain, the entire blockchain fails, along with all of its decentralized apps (DApps). Due to this critical importance of staking, its safety is secured against all but the most severe hacks.

DeFi lending also takes place on DApps residing on top of the underlying blockchain, which introduces an additional layer of vulnerability. Furthermore, DeFi lending presents some very specific security risks, such as flash loan attacks and rug pulls.

Therefore, staking generally poses comparatively fewer security threats to your funds as compared to lending.

Risk vs. Return Difference

The risk-vs.-return between staking and lending, however, may not be as clear-cut. In general, established lending protocols such as Aave or Compound Finance offer lower interest rates for large-cap, popular cryptocurrencies, as compared to standard staking interest rates. However, some smaller lending platforms might offer extremely high-interest rates, usually for highly volatile, small-cap coins.

As with everything in the world of finance, the higher the rate offered, the more risk the investment carries. The downside risks of investing in very new, “dark horse” cryptos available on some lending platforms might be extremely high. Furthermore, when you use DeFi lending protocols, you’ll also face the potential for impermanent loss, due to the volatility of crypto assets. Nevertheless, protocols usually assist with mitigating the losses by distributing a portion of the trading fees to liquidity providers.

Collateralization

Another important factor in the staking vs. lending comparison is collateralization. On lending and borrowing platforms, borrowers are first required to lend funds to the protocol as collateral for their borrowed amounts. Staking, on the other hand, involves no collateral.

Staking

Lending

Security

  • Relatively more secure (only one point of vulnerability — blockchain)
  • Relatively less secure (two points of vulnerability — blockchain and the lending DApp)
  • DeFi lending susceptible to flash-loan attacks and rug pulls

Risk returns

  • Similar risk, but often higher returns as compared to conservative lending options
  • Rate of risk-vs.-return depends on the lending platform used
  • Added risk of impermanent loss when using DeFi lending platforms

Collateralization

  • No collateral required
  • Borrowers provide collateral to the protocol

Staking on Exchanges vs. Staking on Blockchains

If you decide to stake your crypto funds, your two main options will be via CEXs, and/or participation on a blockchain platform, which can be done directly by running a validator node or by joining a staking pool.

Blockchain Staking

Running a blockchain validator node lets you earn staking rewards directly. However, the technical setup and minimum investment requirements are often significant. For example, to run a validator node on Ethereum, you’ll need to download the entire blockchain, be online at all times to avoid “slashing” penalties and run all the requisite software.

Financial requirements for validator nodes are also far from trivial. For instance, Ethereum validators must stake at least 32 ETH (around $51,765 as of Sep 14, 2023).

As an alternative to direct staking, you may join a staking pool such as Lido or Rocket Pool for ETH staking. These staking pool solutions allow users to stake with significantly lower technical and financial commitments. Many ETH staking pools also offer stakers a liquid staking derivative token that represents the staked ETH and its associated rewards, which can be used for various DeFi purposes. However, unlike direct blockchain staking, participating in a staking pool makes you dependent on that pool’s operator.

Staking on CEXs

Instead of staking on a blockchain, whether individually or via a pool, you might consider staking via a CEX. For many crypto investors and users, the CEX route is more affordable, less risky and less technically complicated.

This is largely due to two key factors — the security of your funds, and customer support. Major CEXs are the largest crypto trading platforms in the industry. Their security setups and customer support provide key advantages over blockchains and DApps.

Any potential hacker attacks on a blockchain could lead to potential loss of funds. At the same time, you may use a custodial wallet on a major CEX so that your funds are at lower risk of being hacked. Naturally, CEXs aren’t immune to hacker attacks. However, the larger ones feature cybersecurity as a critical part of their business model. Following the insolvency of one of the world’s leading exchanges, FTX, many major CEXs such as Bybit also include proof of reserves (PoR) to make their holdings entirely transparent to the public. Thus, custodial wallets on these CEXs are relatively more secure as compared to noncustodial blockchain wallets.

Staking on a CEX may also help you access investment products with more stable and predictable rates and terms. For novice investors, it could also be a less complicated way to enter the world of crypto staking.

Additionally, staking on CEXs allows you to use coins that are normally not “stakeable” via a blockchain platform. Blockchain staking only works with cryptocurrencies based on PoS networks. For instance, the world’s largest crypto, Bitcoin (BTC), isn’t based on a PoS network, so it can’t be staked on a blockchain.

Staking on CEX

Staking on a Blockchain

Security

  • More secure, due to the importance of security on established CEXs
  • Less secure, due to higher risk of hacker attacks

Customer Support

  • Readily available
  • Virtually nonexistent — you’re on your own in case of any problems or inquiries

Choice of Coins

  • Wider choice, with the ability to stake coins that normally can’t be staked
  • More limited choice, as some very popular coins (BTC, DOGE, BCH) can’t be staked

Best Crypto Staking Coins for Highest Interest

The volatility of the crypto market means that there’s dynamic change when it comes to the best coins for earning interest. Regardless, the best interest rates in the staking game are normally available via CEX staking. Since CEXs offer a wide array of coins and products, there are often great deals available.

CEXs also offer staking for popular stablecoins — such as USDT, USDC, DAI and more — that can’t normally be staked on a blockchain. In addition, some of these coins have great rates on offer. For example, Bybit’s current interest rate for USDT staking is 15%, one of the highest rates in general for staking.

The table below shows the top five coins available for staking on Bybit.

Coin

Current Best APY

Current Market Cap

USDT

15%

$83.04 billion

USDC

8%

$26.21 billion

SOL

6%

$7.69 billion

MNT

6%

$1.32 billion

ATOM

5%

$1.92 billion

Coins are listed in descending order by interest rates. Interest rate and market cap data are valid as of Sep 14, 2023. (Data source — Bybit.com; Market cap data source — Coingecko.com)

How to Earn Higher Interest on Crypto

Given the volatility of the crypto industry, the key to earning the best crypto interest rates is to keep an eye on the market and source the best deals as they arise.

Invest in Stablecoins

One way to deal with the inherent volatility of crypto markets is to invest using stablecoins. The leading stablecoins — USDT, USDC and DAI — are readily available for staking on exchanges, though not directly on a blockchain.

Stick With One Platform

Some crypto investors, in chasing the best possible rates, move their funds in and out of centralized and decentralized staking and lending opportunities. However, this strategy might backfire, especially with smaller investment amounts, due to the fees involved in withdrawing and depositing your funds on some platforms.

Thus, to earn a higher interest rate in the long term, it’s best to choose a trusted platform in which to stake and hold your crypto, instead of moving your assets around.

Simple Interest vs. Compound Interest

Another important consideration for maximizing your returns is the type of interest rate applicable to a staking or lending product. Some of these pay interest based on APY, while others use the APR calculation method.

The key difference is that APR is a simple interest rate calculation that doesn’t take compounding into account. On the other hand, APY is based on compounding interest. All other things being equal, an APY-based investment will earn you higher total returns as compared to an APR product with the exact same numeric interest rate.

Do Crypto Interest Rates Vary Over Time?

Interest rates on crypto investments do change over time. These changes can be abrupt, and quite substantial. This is particularly true for DeFi lending investments on platforms like Compound, which has algorithmic interest rates that can change within a single day. On the other hand, staking interest rates are comparatively less volatile.

Are You Eligible to Earn Crypto Interest?

Before making your first investment, check your eligibility, as requirements may vary from platform to platform. As the first, obvious requirement, you need to have some actual cryptocurrency funds on hand.

On most established centralized platforms, you also need to satisfy Know Your Customer (KYC) and residency requirements. The residency requirement is particularly relevant for Americans, as some CEXs outside of the U.S. don’t provide service to U.S. residents.

Additionally, you must, of course, do your own research (DYOR) so that you understand the risks and technicalities involved in crypto staking and lending.

Part 2: How to Start Earning Crypto Interest on Bybit

3 steps to start earning crypto interest on Bybit

Bybit is one of the leading crypto trading and investment platforms in the world, offering a wide range of interest-bearing products. To start investing with Bybit, you’ll first need to open an account. You can register your new account with Bybit via email and mobile.

How to Buy Crypto on Bybit

There are three main ways to buy crypto on Bybit: Peer-to-peer (P2P) service, fiat deposit and balance payment service, and credit card/bank transfer.

1. Buying Crypto With P2P

The first option allows you to buy crypto from another Bybit user via Bybit’s P2P platform. There are zero taker and maker fees for these transactions.

2. Buying Crypto With Fiat Deposit and Balance Payment Service

You can also buy crypto using cash through the Fiat Deposit and Balance Payment service. There are over 10 fiat currencies available for this service, including euro (EUR), Brazilian real (BRL), Argentine peso (ARS), British pound (GBP) and Russian ruble (RUB).

3. Buying Crypto Using Credit Cards/Bank Transfer

Bybit also allows you to purchase crypto using credit cards and/or bank wire transfers with the One-Click Buy option.

How to Deposit Crypto on Bybit

You can directly deposit crypto funds into your Bybit account from a variety of centralized and decentralized sources — for instance, accounts on other exchanges, cold or hot wallets, and multisig wallets. To do so, head over to the Assets page on your Bybit account’s homepage. From there, choose the Spot Account section. The available cryptocurrencies will be shown in this section. Click on Deposit next to the crypto you’d like to transfer to Bybit.

Desposit crypto in Bybit spot account

Source: Bybit.com

When you click on Deposit, you’ll see Bybit’s deposit address for the chosen crypto. Simply use this as the destination wallet address in your wallet or account on another exchange.

Part 3: 8 Ways to Earn Interest on Crypto With Bybit

There are eight key ways to earn interest or income on your crypto with Bybit. Let’s take a closer look at each one.

8 ways to earn interest on crypto

1. Earn Interest on Crypto with Staking (Bybit Savings)

Bybit Savings is an investment product that allows you to stake crypto for interest. There are around 40 coins and tokens available for staking, including BTC, ETH, USDT and USDC. Choose between a flexible staking term, where you can withdraw your funds at any time, or a fixed term, which depends upon each crypto and is usually 30 or 60 days.

Bybit Savings is a great choice for risk-averse crypto investors. It provides a simple way to earn stable interest from popular coins and tokens, and you can even choose a flexible staking period. If you’re taking your first steps in the world of crypto investing — or generally prefer predictable and low-risk investment products — Bybit Savings might be the most suitable option for you.

Earn crypto interest on Bybit Savings now!

Pros and Cons of Bybit Savings

Pros

Cons

  • Low risk
  • Guaranteed principal
  • Stable yield

  • Less suitable for experienced investors, who may prefer higher-risk, higher-reward options
  • Flexible plan available

2. Earn Interest on Crypto With Liquidity Mining

Bybit Liquidity Mining uses a revamped automated market maker (AMM) trading model to assist you in providing liquidity to coin-swap liquidity pools. By adding liquidity, you earn a share of the trading fees applicable to the corresponding pool. Each pool comprises a pair, based on USDT and another popular coin, such as BTC, ETH, SOL, XRP, LTC, AVAX and more. Leveraged borrowing is also available to help you maximize your potential earnings.

You can add and withdraw liquidity at any time. Liquidity Mining offers yields that can go as high as 35%, depending upon the coin and trading activity in the pool. It’s a suitable product for those seeking good long-term yields, and a great way to become proficient with AMM-based liquidity investing.

Earn crypto interest on Bybit Liquidity Mining now!

Pros and Cons of Bybit Liquidity Mining

Pros

Cons

  • Potentially favorable long-term yields
  • Leverage available
  • Good entry point to liquidity mining investing
  • Potential impermanent loss
  • High risks if leverage is used

3. Earn Interest on Crypto With Dual Asset

Bybit’s Dual Asset allows you to earn yields even in stagnant or falling markets. Simply predict the price movement of your chosen crypto asset — e.g., BTC, ETH or BIT — against USDT for a preset period. If your chosen crypto increases in price upon maturity of the Dual Asset contract, you’ll receive your funds in USDT. If the price of the coin declines, you’ll be paid out in your chosen crypto.

The maturity periods are typically 1, 3 and 5 days, with some of the highest interest rates offered. Annualized rates of over 380% are possible under some of the 1-day contracts.

Dual Asset is a product suitable for traders who prefer short-term investment options and would like to earn high yields, even when the market is slow or in decline.

Earn crypto interest on Bybit Dual Asset now!

Pros and Cons of Bybit Dual Asset

Pros

Cons

  • Guaranteed yields, with the possibility of earning high yields on some coins
  • Earning potential even during stagnant or bear markets
  • Great product for short-term traders with a focus on swing trading
  • Corresponding return of crypto asset value may be lower, due to market price fluctuations

4. Earn Interest on Crypto With Wealth Management

Wealth Management is a financial service that helps you to manage and grow your investments intelligently through automated investment strategies. It currently offers a Fund Pool aimed at maximizing profits while minimizing risks, regardless of the market condition. By subscribing to the Fund Pool for a period of 30 days, you can earn up to 4.5% APR on USDT investments. Bybit VIP users are also given the option to redeem their profits before the 30 days are up. Once you subscribe to the pool, the investment is made automatically for you. It even includes an Auto-Invest feature, allowing you to reap stable profits in a fully hands-free manner.

Wealth Management is ideal for risk-averse investors, as it utilizes professional risk-neutral investment strategies. VIP customers and users with high net worth will also appreciate the professional wealth management service provided, which facilitates zero-effort investment with high returns.

Earn crypto interest with Bybit Wealth Management now!

Pros and Cons of Bybit Wealth Management

Pros

Cons

  • Low risk

  • Automated investing

  • Fixed subscription period of 30 days with earlier redemption only available for VIP customers

Read more: What Is Bybit Wealth Management?

5. Earn Interest on Crypto With ETH 2.0 Liquid Staking

As mentioned earlier, you can earn from staking ETH by joining staking pools and receiving a liquid tokenized version of ETH, which can be used to generate passive income even while your ETH is locked up. Some examples of such liquid staking tokens are stETH (Lido), rETh (Rocket Pool) and frxETH (Frax Finance).

Bybit also integrates Lido’s Staking Pool to offer ETH 2.0 Liquid Staking, so you can stake ETH to receive stETH. You only need to stake a minimum of 0.1 ETH to start earning stETH rewards with up to 7% APR, and you can choose to redeem your stETH for ETH anytime at a 1:1 ratio.

Moreover, you can gain additional interest from your stETH assets in several ways: Hold stETH in your Bybit account to secure daily yield, trade it on the Bybit Spot market or pledge stETH as collateral to borrow ETH for other investments. If you have a Unified Trading Account (UTA), you can trade using stETH as collateral. 

If you’d like more flexibility in your ETH investments, then ETH 2.0 Liquid Staking is for you, because you’ll gain a liquid token that you can use to profit in other ways while earning from your staking rewards. Furthermore, since stETH is a liquid staking token from Lido, you can also opt to withdraw stETH in order to earn from DeFi vehicles such as yield farming.

Earn crypto interest on Bybit ETH 2.0 Liquid Staking now!

Pros and Cons of Bybit ETH 2.0 Liquid Staking

Pros

Cons

  • Only a small amount of ETH needed to stake

  • Many alternate uses for stETH on Bybit while earning from staking ETH

  • stETH can also be withdrawn for DeFi uses

  • Lower yield as compared to regular staking

6. Earn Interest on Crypto With Bybit Launchpool

Bybit Launchpool lets you invest in tokens of new and promising blockchain projects which are listed periodically on Launchpool. You can stake and unstake your tokens at any time, with no additional fees involved. There are opportunities to earn very high yields of up to 1,000% or more via Launchpool staking.

If you’re constantly on the lookout for new blockchain projects with the potential to become tomorrow’s star performers, then Bybit Launchpool is ideal for you. Moreover, you can potentially earn some of the highest yields available in the world of crypto.

Earn crypto interest on Bybit Launchpool now!

Pros and Cons of Bybit Launchpool

Pros

Cons

  • Stake and unstake at any time with no fees involved
  • Early access to new promising tokens with the potential to become future stars
  • Potential for very high yields
  • Projects/tokens are new, and their market prices may fluctuate or decline sharply

7. Earn Interest on Crypto With Bybit Lending

Bybit Lending enables users to lend their crypto to borrowers in exchange for an hourly interest payment. You can effortlessly deposit your idle crypto funds into an asset pool, generating passive income as your assets are loaned to various Bybit products such as Leveraged Token, Crypto Loans and UTA. The flexible interest rate is determined by the borrowing demand and actual interest generated by the loan amount. 

Users’ funds are completely secure and can be redeemed anytime during the daily redemption window. However, you may not be able to redeem your funds when the redemption daily limit has been reached, or when the Loan-to-Pool Ratio of the asset pool is maxed out. At such times, you’ll have to wait till either the Loan-to-Pool Ratio falls below 100%, or until the next day in the case of reaching the daily redemption limit.

Bybit Lending is a service suited for risk-averse investors looking to earn stable passive income as Bybit helps guarantee the safety of users’ funds in several ways, including collateral value ratios and an Insurance Fund.

Earn crypto interest on Bybit Lending now!

Pros and Cons of Bybit Lending

Pros

Cons

  • High hourly interest rate

  • Funds are fully backed and secure

  • Can redeem funds at any time

  • Cool-down period during which users may not be able to redeem their funds

Read more: Bybit Lending: A Complete Walkthrough to Crypto Lending

8. Earn Interest on Crypto With NFTs

Bybit’s NFT Marketplace is another potential source of crypto income. Unlike the Bybit Earn products above, NFTs on the marketplace aren’t interest-bearing investments per se. Instead, you can earn passive income from NFTs if they appreciate in price, particularly with the GrabPic program, which launches low-priced NFTs (from 0.01 USDT) that can quickly appreciate.

GrabPic doesn’t just offer low-priced, high-quality NFTs: You can also trade at zero fees, which means you’ll get to earn more. There are other ways you can earn profits as well, such as through Merge, GrabPic’s flagship feature that allows you to combine several regular NFTs to create a “legendary” NFT potentially worth 100 USDT.

Bybit NFT Marketplace also offers Mystery Boxes every one or twice a month, which give you the chance to receive a rare NFT that you can sell for a higher price. And if you receive a GameFi NFT, you can use it to reap even more profits in the associated play-to-earn game.

The NFTs listed on the Marketplace come from diverse domains, such as GameFi, the metaverse, artworks and more. You can also conduct multi-chain trades, with support available for four blockchain platforms — Polygon, Tezos, BNB Chain and Klaytn. Bybit’s secure infrastructure ensures that all the NFTs traded on the Marketplace are authentic.

If you’re an NFT enthusiast, then Bybit’s NFT Marketplace is an ideal place to earn crypto interest and have fun.

Earn crypto interest on Bybit NFT Marketplace now!

Pros and Cons of Bybit NFT Marketplace

Pros

Cons

  • Security and authenticity of offered NFTs
  • Multi-chain access
  • Featured-packed, with NFT collection events and ability to merge, blend and burn your NFTs
  • Low barrier to entry with low price offerings; easy to purchase with Bybit Spot Account
  • A single source for NFTs from a variety of popular genres, such as GameFi and the metaverse
  • NFTs have low liquidity compared to crypto coins and tokens

Read more: What Is Bybit NFT Marketplace?

Part 4: Dealing With Your Crypto Interest Taxes

Which Countries Allow You to Earn Tax-Free Interest on Crypto?

Due to its novelty as a financial asset class, many countries around the world haven’t yet introduced taxes on crypto. This applies to the majority of jurisdictions. Unless your country’s taxation authority specifically addresses the issue of crypto income, you may enjoy, at least for now, tax-free crypto income. Some of the most crypto-friendly countries in the world include Germany, Portugal, Singapore, Switzerland, El Salvador, Malta, Cyprus and Belarus.

Note, however, that in some of these jurisdictions, crypto income might be taxable if crypto trading is determined to be your principal business activity.

Which Countries Require You to File Crypto Interest Taxes?

Many OECD countries — as well as some of the largest economies outside of the OECD — have explicitly legislated crypto taxes. Below, we’ll briefly cover the current state of affairs in this area as applicable to four economies — the United States, Australia, India and Japan. Crypto taxation laws in these countries are among the least forgiving on the planet.

United States

U.S. authorities tax cryptocurrency capital gains, as well as any non-capital income from crypto, which includes crypto interest income. In the land of the free, your crypto interest income is generally treated as ordinary income and is subject to income tax rules. There are also instances where it may be treated as capital gains — for example when you trade crypto assets, such as NFTs — in which you’ll be taxed accordingly.

Australia

Similar to the U.S., Australia treats your crypto interest earnings as ordinary income, unless you swap assets, in which case you’ll be subject to capital gains tax.

India

Since April 1, 2022, the Indian government charges a 30% flat tax rate on all crypto gains and income. The government applies this tax rule broadly, regardless of the nature of the crypto income. As such, crypto interest is likely to fall under this rule.

Japan

For Japanese tax residents, crypto interest is classified as “miscellaneous income” and forms part of your total taxable income. As a Japanese taxpayer, you’re required to pay income tax on crypto interest earnings at your corresponding tax bracket rate.

Part 5: Pros and Cons of Earning Crypto Interest

Table comparing pros and cons to earning interest on crypto.

Benefits of Earning Interest on Crypto

Earning crypto interest carries numerous benefits. The main ones are as follows:

  • The ability to generate passive income without having to dedicate time to active trading
  • Income diversification away from overreliance on stocks, bonds and fiat currencies
  • Some products — such as Bybit Savings (staking) — are especially suitable for novice investors, as they require minimal monitoring
  • Products like Bybit Launchpool offer low-risk, high-yield returns, unlike trading, which is generally riskier
  • Ability to earn during bear markets with products such as Dual Asset

Risks Involved in Staking Crypto

Despite its benefits, crypto staking (and crypto investing in general) is certainly not a completely risk-free activity. The key risks include:

  • Potential price declines for the coin(s) you own. Due to the volatility in the crypto market, your high yields might be offset by a coin’s price decline, leaving you in the red as a result.
  • Some staking platforms, particularly decentralized ones, have lock-up periods lasting weeks or months, a significant amount of time by the standards of the fast-changing crypto market.

Part 6: Recap of How to Earn High Interest on Crypto

Bybit Checklist: Finding the Best Product to Earn Interest on Crypto

As a recap of our discussion, here’s a summary of the eight key products on Bybit that let you earn crypto income.

Bybit Savings: A low-risk, principal-guaranteed investment with customizable investment periods, particularly suitable for beginners and risk-averse investors.

Liquidity Mining: Provides good long-term yields, with the ability to add leverage to maximize yields. Ideal for experienced traders familiar with leverage and the liquidity mining process.

Dual Asset: Earn one of two different coins, depending upon the market’s direction, by betting on the rate movements of a chosen crypto asset against USDT. Suits short-term, focused swing traders.

Wealth Management: Earn a stable passive income from automated professional investment strategies. Targeted for risk-averse investors, VIP customers and users with high net worth. 

ETH 2.0 Liquid Staking: Flexible use of liquid staking derivative token, stETH, obtained from staking ETH. A good fit for investors well-versed in both CeFi and DeFi trading who can profit from stETH in multiple ways while earning staking rewards.

Bybit Launchpool: Flexible staking for promising new coins with high-yield returns. Suitable for investors looking for high yields and potential “future star” coins.

Bybit Lending: Hourly interest payouts from depositing idle cryptocurrencies into asset pools, from which they’ll be loaned to various Bybit products such as Leveraged Token, Crypto Loans and UTA. Suited for risk-averse investors looking to earn a steady passive income stream.

NFT Marketplace: Investing on low-price, high-quality NFTs that appreciate quickly in value. Ideal for NFT enthusiasts and traders focused on capital gains income rather than interest.

Which Bybit product is best for you to earn interest on crypto

FAQs: Crypto Interest Earning

1. What’s the best way to earn interest on crypto?

The best way to earn crypto interest will be highly dependent on your risk appetite. Naturally, higher yield opportunities come with higher risks. Among the Bybit products detailed above, the highest potential yields are often found in Bybit Launchpool and Dual Asset. On the other end of the risk/reward spectrum is Bybit Savings, a product with guaranteed yields for the most risk-averse investors.

2. How do I calculate interest earned on crypto?

APR and APY are the two primary methods of interest calculation. While APR is a straightforward, simple interest calculation method, the formula for APY is more complex. You can use an online crypto APY calculator to calculate APY.

3. Which crypto pays the most interest?

Aside from highly volatile or new coins, the best interest rates are often offered for established stablecoins, such as USDT and USDC.

4. Are crypto staking rewards taxable?

This depends entirely upon your country of residence. Specifically, for U.S. residents, it’s safe to assume that the Internal Revenue Service (IRS) will apply income taxes to your staking earnings, just as it does for crypto interest income. The prevailing consensus is that the IRS is keen to tax anything in sight that has the word “crypto” on it.

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